The following story was supplied by the University of Guelph News Services:
With restaurants closed and so many Canadians ordering in these days, food delivery companies should be seeing booming profits, but in fact, most are not, says a University of Guelph food economist.
Prof. Michael von Massow studies the structure and performance of food supply chains in U of G’s Department of Food, Agricultural and Resource Economics, and is available for interviews.
He says there are fundamental problems in the food delivery business model that are hurting many players – with the exception of consumers.
This week, German-based food delivery company, Foodora, announced it was leaving the Canadian market. Von Massow says the exit of Foodora is “hardly a surprise” despite the fact that it distinguished itself by offering liquor store deliveries in select markets.
Though it may seem surprising that a company has failed during what seems to be “a golden opportunity for delivery,” von Massow says no food delivery company has made money in Canada.
“Everyone has always hoped that as volume grew, we would see profitability increase, but that doesn’t seem to be the case as yet,” he said, adding that restaurants too, have complained about lost margins from delivery service fees.
“Really, the only person that’s gaining is the consumer. And that’s fine, but that’s not a sustainable business model,” he said.
Von Massow said it will be interesting to see what happens with delivery as the restaurant shutdowns continue. But, for now, the current business model needs to be re-examined if any player is going to stay in business.